Bob Farrell’s 10 Rules for Investing

Bob Farrell was a legend at Merrill Lynch & Co. for several decades. Farrell had a front-row seat to the go-go markets of the late 1960s, mid-1980s and late 1990s, the brutal bear market of 1973-74, and October 1987’s crash.

He retired as chief stock market analyst at the end of 1992, but continued to occasionally publish. Rumor has it for a humongous donation to Farrell’s favorite charity, you can get on his very exclusive email list.

Marketwatch gathered some of Farrell’s more famous observations, and republished them as "10 Market Rules to Remember."

1. Markets tend to return to the mean over time

When stocks go too far in one direction, they come back. Euphoria and pessimism can cloud people’s heads. It’s easy to get caught up in the heat of the moment and lose perspective.

2. Excesses in one direction will lead to an opposite excess in the other direction

Think of the market baseline as attached to a rubber string. Any action to far in one direction not only brings you back to the baseline, but leads to an overshoot in the opposite direction.

3. There are no new eras — excesses are never permanent

Whatever the latest hot sector is, it eventually overheats, mean reverts, and then overshoots. Look at how far the emerging markets and BRIC nations ran over the past 6 years, only to get cut in half.

As the fever builds, a chorus of "this time it’s different" will be heard, even if those exact words are never used. And of course, it — Human Nature — never is different.

4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways

Regardless of how hot a sector is, don’t expect a plateau to work off the excesses. Profits are locked in by selling, and that invariably leads to a significant correction — eventually. comes.

5. The public buys the most at the top and the least at the bottom

That’s why contrarian-minded investors can make good money if they follow the sentiment indicators and have good timing.

Watch Investors Intelligence (measuring the mood of more than 100 investment newsletter writers) and the American Association of Individual Investors survey.

6. Fear and greed are stronger than long-term resolve

Investors can be their own worst enemy, particularly when emotions take hold. Gains "make us exuberant; they enhance well-being and promote optimism," says Santa Clara University finance professor Meir Statman. His studies of investor behavior show that "Losses bring sadness, disgust, fear, regret. Fear increases the sense of risk and some react by shunning stocks."

7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names

Hence, why breadth and volume are so important. Think of it as strength in numbers. Broad momentum is hard to stop, Farrell observes. Watch for when momentum channels into a small number of stocks ("Nifty 50" stocks).

I would suggest that as of August 2008, we are on our third reflexive rebound — the Januuary rate cuts, the Bear Stearns low in March, and now the Fannie/Freddie rescue lows of July.

Even with these sporadic rallies end, we have yet to see the long drawn out fundamental portion of the Bear Market.

9. When all the experts and forecasts agree — something else is going to happen

As Stovall, the S&P investment strategist, puts it: "If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?" Going against the herd as Farrell repeatedly suggests can be very profitable, especially for patient buyers who raise cash from frothy markets and reinvest it when sentiment is darkest.

10. Bull markets are more fun than bear markets

Especially if you are long only or mandated to be full invested. Those with more flexible charters might squeek out a smile or two here and there.

Rules that worked in the past generally work in the future, especially when they are based in human psychology.

Nonetheless, I always worry that something might fundamentally change at some point. Anybody see any game changers in this whole debt/credit/market debacle going on presently? Or, is it all just business as usual……

Sure, “this time it’s different” is dangerous if you think that a country can live beyond its means forever, or that a company can have no revenues or business model forever, or that the grounds of the Imperial palace in Tokyo can truly be worth more as real estate than the entire state of California, or that trees grow to the sky. Some ideas are simply unsustainable and preposterous in any era or any economic environment.

However, “no new eras” is poorly phrased if not outright wrong. We experience gradual evolution into new eras and new paradigms all the time: for instance, the Eighties ushered in an era in which a software company like Microsoft can have a market cap in the billions, an era in which Japanese car companies can outcompete GM and Ford, and many other examples. When a new era becomes the status quo, we forget how different it was from what preceded it. Half the fun of investing is trying to figure out sustainable long-term trends which will be obvious only in hindsight and betting big on them.

Even if a trend cannot be permanent it can still present a long-lasting opportunity: anyone who scoffed in 1982 missed out in a big way if they disbelieved the possibility of a decades-long bull market replacing the range-bound equity markets of the prior fifteen years, on the grounds that “it isn’t going to be any different this time”.

And in particular, it would be very foolhardy to believe that the credit crunch will blow over soon and we will mean-revert back to normal. We are indeed on the brink of a new era, a disadvantageous and dangerous one, in which a lot of things will indeed be different than before.

PS, World Beta had a good post some time ago about how investing in the 19th century was very different from what we are used to today: mostly bonds not stocks, mostly dividends and not capital gains, no equity premium, no “risk-free” government-debt investments, no long-term inflation. The post also makes a good point about how in some markets at some times, market timing is absolutely essential.

The bottom line: it’s never “different this time”… until one day, it is.

This: “7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names

Hence, why breadth and volume are so important. Think of it as strength in numbers. Broad momentum is hard to stop, Farrell observes. Watch for when momentum channels into a small number of stocks (“Nifty 50” stocks).

to me, is one of strongest reasons to pay attention to ‘Technicals’.

Volume, if we can still believe that statistic, tells one alot of what they need to know about Price action.

anon-

nice post, good points. also, with this: “about how investing in the 19th century was very different from what we are used to today” -I think we need to reflect on the fact that during that Time, Money was still in circulation v. Today, where the USTreas should increase Rev. by offering Advertising, on the Notes it prints for the FedRes, to Xerox..

I think he was making an allusion to Calvin Coolidge’s statement in 1927 that America was “entering upon a new era of prosperity.” The “New Era” phrase became a slogan.

I still remember seeing the cover of, I believe, Money Magazine in a grocery checkout line back in the late 1990’s. It asked: “A New Era for Investors?” Don’t know if they were serious or tongue in cheek, but it struck me that the fact that they thought it worth putting the question on the cover was a sign that things were getting out of hand.

And while modes of investment may change, arithmetic does not. The capacity of humans to buy into bubbles and rationalize their existence is permanent, as seen in the recent oil bubble.

Just curious…the tech wreck in 2000 and subsequent low interest rates caused a lot of weary investors to shift their investments from equities to real estate during the early part of this decade. If indeed we are headed into a prolonged recession, will there be another shift out of equities, and if so, where is the smart money likely to go?

I think we already saw one try at alternative investments in the commodities bubble. Trouble was, too many tried it at the same time, as per what that hedge fund manager said in the interview Barry posted last week.

IMHO, I expect short term deflation because of the global contraction with prices falling globally, making cash king in the short term. Don’t know what currency will be best. I think the dollar rally will be short lived once it is accepted how bad it is here and Bernanke, et al crank up the presses. The Euro should be fundamentally better, since they have been more restrained. Yuan looked good but we can’t buy it and the Chinese may have some problems of their own.

Marc Faber still thinks commodities is the place to be once they bottom out. See his interview posted here recently.

And, obviously, those strong companies that survive the crash with viable business models will be in an even better position after their competitors are eliminated. Of course, you have to wait for the stocks to bottom for that.

Like you, I’m wondering what population’s opinions are the contrary indicator. Over at Husssmanfunds.com, Hester writes:

“It’s difficult to make the case that stock analysts are anywhere near as anxious. In the fourth quarter of 2008 – the same 3-month period for which economists are expecting the economy to contract – stock analysts are forecasting that S&P 500 Index earnings will grow by 46 percent, according to Bloomberg data. A bulk of that is derived from an expected rebound in earnings from the financials group. But even ex-financials, earnings are expected to grow 14 percent in the fourth quarter, and then by 16 percent in the first quarter of 2009.”

Could it be that Barry’s group of illuminati is more correct than the Wall Street Flacks? Or maybe those quoted in the Barron’s article are is too optimistic :)

Bear markets can be just as fun as bull markets. It is the expectation of profits that can be exciting. Like in the first couple of rules, markets always divert to the mean. If you are using that logic now, you could be very profitable in the future.

Great post, Bob Ferrell definitely puts out some interesting and entertaining insights. Nothing really new in his list but it’s all tried and true advice. I hope you get that interview set up, I’d love to see you dig a little deeper into the detail of his comments. Ask him about diversification if you get the chance. I thought it was strange that he doesn’t include it in his list anywhere, that should definitely be a in any Long-Term Investing Principles list but I bet that’s because this list was compiled by MarketWatch and not by Ferrell.
Cheers!
Odd Lot

Not Business As Usual
It’s A Generational Bear In Credit, Says Legendary Analyst Bob Farrell

“Legend,” “Guru,” “Dean of Wall Street Research.” Those are just a few of the sobriquets invariably joined with the name of Robert J. Farrell, Sr., who in his 50 years with Merrill Lynch became America’s best-known, and most distinguished, technical market analyst and strategist, compiling a long record of uncannily accurate calls. Full disclosure: Not a few of those calls he broadcast to the wider investing public through interviews over the years with yours truly in Barron’s. I counted more than 10 in just one 5-year stretch in the late 1980s and early 1990s. Bob has been away from Merrill and deliberately out of the limelight for about a decade now. But he’s scarcely retired; still actively plies his trade for a very few select institutional clients, through his own Farrell Advisory Associates. When I caught up with Bob recently, he was rested and relaxed, having just gotten back from a brief jaunt to Nantucket, while my head was spinning, trying to absorb the boom in crude amid the carnage in credit. But just like old times, it all made perfect – albeit distinctly uncomfortable – sense by the time Bob stopped talking. Listen in.

What do you make of this market’s dismal behavior, Bob? What sort of beast is it?

The hardest thing to do is to put it into a long-term context. But I’d say this is not business as usual. I think Ned Davis put out something saying that the MSCI, the world index, is down 13% in the first half, which is its worst performance in the last 38 years – or as long as they have been keeping those figures. Meanwhile, the Dow is off 14.4%, its worst showing since 1970. Even Warren Buffett had his worst first half since 1990, with Berkshire returns down 20%. We are in a period where there’s a lot of conflicting – and also worrisome – long-term stuff. As I look at it on a long-term basis, I think we reached a generational peak in the creation and use of credit. I was born in 1932, which was at the bottom of the long wave, or in the Depression; so I grew up in a constantly improving economic environment. But in the early phases of the expansion, in the late 1940s early ’50s, nobody would borrow anything. They worried that the same thing would happen to them as what happened during the Depression. So they all spent only out of what they earned and what they saved. Of course, that wasn’t the right time to be doing that; the early ’50s were a great time to be leveraging yourself into assets because we had a big asset boom coming. By the end of the century, conversely, we had no one fearing being in debt and debt was not only leverage by individuals but leverage by corporations. And of course, all of these derivative products were created to leverage more. So no fear of being in debt went along with a period of high expectations – in other words, with a period in which you can be disappointed the most. Somebody once said to me that I underestimated my potential; that I was always too conservative. Well, that’s still true, but I think that we’re not going to come out of this credit crisis quickly. It’s pretty obvious that this is not just another cycle, where we got into too much trouble with debt and therefore we’re going to wipe out the debt and then we’ll go off and everything will be fine again.

Are you saying there’s no recovery?

No, we’ll reach a point of recovery. We’ll reach a point of extreme. But this is probably comparable, as far as bubbles are concerned, to the technology bubble or to the bubble in Japan in 1989 or to the bubble in housing or to any of the bubbles in the past in which markets went parabolic and those peak values were assumed to be the new reality. Always, these markets get into trouble because they’ve reached their peak through the use of credit or leverage. All of this fits with the return to the mean and the rates of return on stocks; stocks gave terrific rates of return for 18 years; they averaged over 15% in the 1980s and 1990s. Now we’re due to have an underperforming decade or more and so far this is the worst relative rate of return decade since the 1930s.

A lovely comparison, that.

We’re dealing with a lot of influences of a longer-term nature that are changing the markets. Some of the things that have happened around us are, like in the theater, “You can’t make this stuff up:” The uptick rule on short sales was dropped just as the bear market starts – just about a year ago – that was brilliant. And comparable to that was the Merrill Lynch analyst downgrading General Motors (GM) today [7/2/08] to underperform, at a 58-year low, at 12 down from 94; it’s unbelievable stuff. Maybe he’s right and it’ll go bankrupt. But in the meantime, it’s not very helpful.

Isn’t that a sort of a bear market corollary to Murphy’s Law?

Well, trying to analyze what’s going on right now I think we’re in a bear market. A bear market led by the collapse of the financial sector – and the inability to get a handle on how much more downside there is in financials is what’s extending the bear market. Yet at the same time, there’s a bull market going on in the energy stocks and it’s been going on in infrastructure and agriculture stocks and in other stocks related to commodities. But what we’re in right now is a very oversold market and what I’ve observed is that it is characteristic of this market that just at the time you think things are looking better, it’s the time to sell, and vice versa. You get breakouts, like in the transports, which made a new all-time high – just before they start down. The S&P makes a breakout high in the middle of May and then starts down. Then the same thing happens on the downside: When you get a break to the downside, many times there’s at least a short-run turnaround that happens right after that. So we have a market of breakout failures. Whether that’s because the hedge funds are playing against the guys reading the charts or whatever, the markets have been tending to go to extremes or getting overbought, getting more optimistic sentiment, about every two months. The peak of the market so far, in terms of breadth, was just about a year ago in July.

Not in October?

Not in terms of breadth. Many mark it as October because the S&P and the Dow made new highs in October, but we had a significant down move in July and August, almost 6 to 8 weeks during which the market got very oversold. Then we started back up again and made the high in early, mid-October, but most stocks did not follow the averages to new highs. Then the market went down into late November, went back up in December (that was a shorter move up), and then down into January with a recovery in February. But then two months later, came the March low. Thereafter, we had a pretty good rally from the middle of March to the middle of May. Now we’re having two more months down. In each one of these cycles, strong stocks have tended to go down some, but to come back and make higher highs, while the weak stocks have kept making lower lows after their rallies. The financials are the real question marks and also the consumer discretionary stocks. How much will all this environment affect the consumer with the rising cost of everything?

Except their houses.

Right. There are so many pressures. We’ve gone through so many times when we’ve said, “The consumer is going to cut back,” and then he didn’t, that you are tempted to say this time he won’t cut back, either. But I think, finally, this time, it’s different – if you can use those words and not be in fear. The current position of the market is another leg down in the financials.

Even from here?

They’re extremely oversold and should rally. One way of measuring it is what percentage of the financial stocks are above their 200-day moving averages, and above their 50-day moving averages and above their 20-day moving averages. Right now, 10% are above their 200-day moving averages and 3.3% are above the 50- and the 20-day, which is as extreme as it’s gotten during this bear market. We’ve had a leg down lasting – it’s been 8 weeks and sentiment has clearly changed; you don’t find a lot of bulls right now. I think we’ve had hedge fund influence at the end of the quarter. This is more anecdotal, not something where I can cite a statistic, but there apparently were a lot of hedge fund withdrawals notified for the end of the second quarter, which I think added pressure to the market near the end of the quarter. And it has continued into early July. But we don’t know that for sure. When we look at the sentiment, the interesting thing is that we’ve got lots of bearish sentiment. The Investors Intelligence survey currently has reached 47% bears; that’s the most since 1994. The AAII, American Association of Individual Investors, poll got to a bearish extreme – or equaled its March low, anyway – two weeks ago. The ISI hedge funds net exposure survey is down to about 45% and that is the lowest since January, when it got down a little lower, to 43, I think.

Doesn’t all that bearish sentiment make you bullish?

All of these things are saying you’ve got an oversold market to an interim extreme. What’s missing is whether this ends with some kind of a capitulation that forces the VIX and the put/call ratio up. Everybody keeps talking about the VIX and the put/call ratio. In these other downtrends, like in January and last August and in March, there were spike days in which the put/call ratio shot up to about 1.50, and there hasn’t been one of those spikes in this sequence, even though the sell-off has been pretty sharp. So we may need a little more – a holiday shortened week isn’t generally a week in which you can expect a whole lot of action. But I do think that we’re near the end of this leg down – and that there’s going to be a recovery. We have finally started a correction, in this cycle, in the stronger stocks. We have been having corrections in steels and rails and some of the other previously strong stocks connected with the materials sector. Now the energy stocks have weakened, as well. Usually, there’s a drop in the strongest stocks right near the end. So it might be that there is still some reaction or capitulation to go here. But the ingredients for an interim low are present.

Let me get this straight – the recovery you’re expecting would only be a relief rally in a bear market?

For most stocks, yes. The basic position of the market is intermediate-term oversold, but I still think it’s generally a bear market. I don’t see the fallout from the bubble on the credit and banking side ending right here. When we’ve had bubbles in other sectors, like technology and the Japanese market, the bursting of those bubbles in a sector ultimately affected everything. When we had the technology stocks starting down in early 2000, for example, a lot of other things held up until July of 2002. Then everything caved, and that was the real ending of that bear sequence.

And we’re not close to that kind of washout?

Now, I don’t know when that’s going to come. But when I go back and look at major bubbles, where you’ve gone parabolic and where everybody wanted a piece of the action and got leveraged taking advantage of it, it’s taken quite a while to finish the first step of the corrective process. The technology bubble is probably the freshest example in mind, and the Nasdaq, as a proxy for techs, took 2½ years to go to its bottom. Already housing is down for over 2 years; The Japanese market took 2½ years to bottom in 1992; In 1929-’32, the first move down took 2 years and 9 months. So the likelihood is that, since we’re only 1 year and 1 month into the financials’ cycle down, there is more to go on the downside – with rallies – in the next year; that there’s more time needed before what I call the A wave is completed.

The A wave?

There are three stages in the bear markets that follow bubbles or big booms: The A wave is the first big markdown and that’s what we’re in right now in the financial sector. The second, or B wave, is the recovery that comes after that. If you put it in Nasdaq terms, when the tech bubble burst, it went from 5100 down to 1100, down nearly 80%, in the first wave and then, over the next five years, went up to 3000. It almost recovered 50%. Now, when you look back, the last time that we had something similar to that was in 1929-’32. Back then, the Dow went down 89%, and in the 5 years from the ’32 low to ’37 high there was a 50% retracement of the decline. Then the C wave started.

Which does how much more damage?

The C wave is the deceiving one, where it lasts a fair amount of time. It can last several years. When you get to the end of the C wave, things are really undervalued and nobody cares. In any event, there eventually will be a recovery in the financial sector; they’ll finally work it all out. But it’s going to take more time to get to the point where that occurs. As it stands now, I don’t think we’re at the end of the bear market in financials. But there’s a good chance for a rally because the markets and the financials are extremely oversold. And I think it could start sometime soon – maybe next week.

Haven’t you long said that a mark of the bear is that stocks get oversold – and stay that way a lot longer than people believe is possible?

Right, but eventually, there’s a rally – in what is still a bear market. The converse is also true in a bull market: The energy stocks or the price of crude have been in a bull market; they get overbought and yet they keep going up. It seems to me that if there were a contrary view currently, it would be that the crude oil price is coming down or going to have a correction, just based on what everybody says, including the Arabs and all the people in the business, who are expecting much higher prices. That’s part of the strategic problem of dealing with this market.

How so?

What you have made money in and are making money in still is all of the stuff connected with the commodity game-and that includes gold. But these areas are extended on the upside at the same time the financials and consumer discretionary stocks are extended on the downside. A correction in the strong sectors could coincide with a relief recovery in the weak areas and confuse investors who have been positioned correctly for the long term. Right now I’m more inclined to think that this is not the final or the big washout, the waterfall decline that we are experiencing. I think this is another step down and therefore we are at an extreme that’s going to have a comeback. So how long will that last? If there’s no washout or there’s no spike up in VIX, for example, my guess is it’ll be short, three or four weeks. If we have some kind of a spike up in VIX, then it might last six to eight weeks. One other sign that should tell us whether we have a three-week or a six-to-eight-week rally is whether we get a 90% up day. Everyone is following Lowry’s Research for that. I’ve been a subscriber to Lowry’s since 1958 – that’s 50 years! At first, it was Merrill Lynch paying for it; now I pay for it. Lowry’s old multiple 90% down days followed by the 90% up day signal can be a much more bullish change. So far, we haven’t had that; we have to see what the rally shows us. So basically I’m looking for a rally but remain cautious. It might last as long as six to eight weeks, but I still think we’ll be coming down again in the fall. Where the low is, I don’t know.

But all we’re likely getting soon is a relief rally in financials?

Right, in the 5 years from 2002-2007, a number of technology stocks made good gains. They went from the depressed levels back up halfway or whatever. It was a good percentage change. Somewhere along the line, that will happen with the financials. But for the time being, it’s not the time to catch a falling knife, I think the financials and the market are due for a rebound, but not a major turnaround.

So your advice is -?

The two things you have had to do strategically in this market -?and I think this is still right – is only buy them when the market looks bad and is oversold and when the news has been as bad as it could be, and sell them when it’s overbought and sentiment is getting happy again. That was the way it looked in May and the way it looked at the beginning of the year. But that’s a trading mentality. The other strategy, for investors, is to try to identify what the long-term trends are.

And on that score, you still like energy?

The long-term trends do favor the commodities area and energy, still. I know energy is going to get to an extreme and, at some point; we’re going to correct them. But the energy stocks, particularly the oil stocks, have been behind the price of crude. The infrastructure play also seems likely to continue, although if this is still a bear market, there’s a chance that even some of the better stocks in that group will come down. When we went through the last big bear market, you could see that it was a process. You had a certain part of the market – the value stocks – hold up almost the whole time. Those leadership stocks did suffer a crack right at the end, but then they bounced right back.

At the same time, I take it; the long-term trends don’t favor financials?

Right. Another way to look at this is through sector weightings in the S&P 500. Over the years, we have noted that when any sector becomes overly dominant in weighting, either as a percent of the S&P 500 or as a percent of global market capitalization, there is ultimately a fall from the pedestal of popularity of major magnitude. What we do not know is how far and for how long a sector’s weighting will rise. One of the greatest extremes occurred in the late 1980s, when Japan’s equity capitalization rose to 49% of the global total. What we do know from experience is that once a sector bubble bursts and equity valuations start to implode, there is a long and substantial contraction. Japan, almost 20 years later remains down around 10%. Other examples include the energy sector weighting in 1980 of 30% of the S&P 500, which fell 50% in three years and reached 5% early this decade, and the technology sector weighting in 2000 of 35% of the S&P 500, which is now down to 13%. From this perspective, the financial sector all-time peak in 2007 of 22%, which is currently down to 16%, still likely has a long way to go in time and in equity valuation contraction. The credit bubble and financial institution excesses are generational in scope and unlikely to undergo a short-lived or smaller-than-normal contraction.

So the bears have overwhelmed Goldilocks so the outlook can only be described as grim?

There are always opportunities. What is noteworthy in that regard is that as a high sector weighting contracts something else takes its place. Energy replaced the Nifty Fifty consumer growth stocks in the 1970s. Technology eventually replaced energy in the 1980s and 1990s. Japan mainly was replaced by the equity boom in the U.S. in the 1990s. What is interesting is that the energy sector’s weighting is rising again, up to 15%, as financials have fallen to 16%. It would appear that neither sector has reached an excessive weighting yet and are likely to cross, with energy well above financials before the sector shifts are complete.

Okay, I have to ask, what about techs? Can they rise from the ashes?

The technology bear market had the A wave back in 2000 through 2002, when the proxy (Nasdaq) went from 5100 to 1100; then we had a 50% recovery in Nasdaq, and optimism about a new bull market in tech was building when the B wave hit its peak; A is down, B is back up again. And then comes the C wave. The C wave, as I mentioned, is the deceiving one. It can last several years and when you get to the end of the C wave, nobody cares.

And the fact that I’m even asking –

Well, “old” technology – as contrasted with new tech favorites like Google (GOOG) and Research in Motion (RIMM) – is now a year into its C wave (although some of the individual stocks have been in the C wave for a longer time). And the Nasdaq has lost about 23%, but I don’t think we’re ready for a takeoff in technology because a lot of people are recommending that you’ve got to buy technology. Of course, now there may be some technology stocks that work – and that may be what the best way of handling this market is: Even in the worst bear market, there are some things that do well.

Sure, but the real trick is finding them.

It’s a “be short some, be long some, watch out for the oversold points and the overbought points on an intermediate basis, so that you don’t get whipsawed and beware of the breakouts” kind of market. Outside of that, I don’t know what’s going to happen. Look at the S&P. The S&P went down 50% in 2002, after the big bull market in large cap stocks from ’94 to ’98-’99. That bull market took the big S&P stocks, like General Electric (GE), to very high valuations. So then they had a big down of 50%, and following that, they went all the way back to the high on a B wave retracement. But now they’re in a C wave, and that’s the complication of the market today. It’s almost better to say it’s a stock-picking market, which is a cop out that many people use. But the thing is to pay attention to stock picking and to having some hedge against the longs with some shorts. I’m not condemning technology across the board; technology is always going to have something that is new and working. But the old techs face a rough road. Remember, RCA was a big stock in the 1920s, a glamorous high tech – and RCA didn’t better its 1929 high until 1984, and that was on a takeout.